Fintech in its various forms does not pose any current, systemic risks to the world’s financial system, according to Svein Andresen – secretary general of the global Financial Stability Board (FSB).
However, he noted, authorities around the world must continue to monitor the effects of its evolution on financial products and services.
Andresen made his call for ongoing vigilance in a 3 November speech at the headquarters of prominent UK think tank Chatham House.
The FSB, he said, is currently undertaking a study of the “key elements underlying the broad swath” of fintech developments, and examining their implications for financial stability.
That work has already identified three “elemental promises” that are common to the majority of fintech innovations:
Those promises, Andresen said, all have financial stability implications, “especially if the trend towards adoption of fintech continues”.
As a result, he pointed out, “authorities should be vigilant and should actively monitor the effects that fintech innovations have on specific products and services, as well as on incumbent financial institutions, financial markets and the economy more broadly.”
He stressed: “Authorities should also consider how their ability to supervise and regulate the system is affected. In short, we have undertaken much analysis – but inevitably, with a rapidly expanding landscape, we have more work to do.”
As leader of the body set up to oversee the financial system in the wake of the 2008 crash, Andresen announced that his organisation has a firm grip on the more cutting-edge tools that will come to define fintech as they are honed and refined.
“We have considered the financial stability implications of distributed ledger technology,” he said, “and we continue to work in this area, jointly with the Committee on Payments and Market Infrastructures, to identify key issues that market participants and policymakers need to address.
“We are conducting an in-depth study of the financial stability implications of peer-to-peer lending with the Bank for International Settlements’ Committee on the Global Financial System. And we are beginning work to understand the financial applications of machine learning.”
He added: “We are also undertaking stocktakes with the Basel Committee on Banking Supervision of the work done by FSB and Basel Committee members at national levels on fintech issues.
“This has covered members’ experimentation with distributed ledger technology and what they have learned, as well as experiences with innovation facilitators – sandboxes, hubs and accelerators.”